Commercial University

By: Bryan Dulaney

If you own a lot of property, you might need some help keeping up with things. Some like to have someone do everything for them, and they just collect the money after the rents are paid, and some like to have someone just for maintenance reasons, or perhaps to handle phone calls and complaints. Whatever it is that you are looking for, you do have to take some time when deciding who can help you with property management ,and who might do you more harm than good.

Some landlords like help with property management that involves just the upkeep. They may have someone hired to do the landscaping on all properties, and that is usually something you can hire a company to do. This is often not a hard choice, as long as someone shows up when they should and they are doing all of the work they promise. That might include just the lawns, but might also include upkeep of the property in the way of picking up trash and other odd jobs. References arenít immensely important if they are not allowed access to the buildings on your property, but they might still be a good idea anyway.

Some property management can be done by a company. Some will show the property to potential renters, take their applications, do credit checks, and then collect rent when and if they are approved. They may also makes calls for repairmen when something goes wrong, and they might check up to be sure the paint is in good shape and that the tenants are not trashing the property. This kind of property management is for the landlord that does not have time, lives far away, or simply has no interest in it. If choosing something like this, make sure to get references so that your properties and your interests are not going down the tubes when you are not looking. 

Others have a mixture of the two for property management. They may have someone handle the money, and someone else for maintenance work. The landlord may take phone calls directly from the tenants when there is a problem, and may want to screen applicants on their own. Before hiring anyone in any type of official capacity for property management, make sure you do some checking of your own. References are great, but a criminal and background check might be a great idea. That way you can rest a little easier letting someone else handle what is very important to you. 

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Augmented global travel particularly from emerging market segments of India and China is the reason behind the undying upswing in the hotel industry. Unsurprisingly, hotel investment experts around the globe are ecstatic about this emerging trend. Hotel owners, operators and investors alike are quick to jump on to new acquisitions. But at the same time, it also holds true that investment in the hotel industry is plagued with complications and risk. A huge amount of capital is at stake, and this calls for a meticulously planned move and enormous expertise on the part of the investor. Investors should and do rely upon expert opinion before deciding upon an investment. Some vital points that need to be given a second thought before putting down the cash for investment in a hotel are discussed below.

Inspect

The hotel property, despite putting up a pretty face, may be rendered unusable after finishing the deal, due to reasons such as underground environment pollution, interior mold infestation, and structural damage from termites and rodents. Finalize the deal only after thoroughly investigating the property yourself. Authentication from an engineer to check for all the above conditions and to make sure that the property complies with building codes is necessary.

Know your hotel management company

If you are thinking of employing a hotel management firm to mind your business, be sure of its capabilities through different sources. Take a look at its operating performance and cross check with other hotels that it manages. Analyze its record in maximizing revenues and keeping expenses in control.

Analyze visitor segments

It is necessary that the hotel gets visitors from all segments like commercial, group, business and leisure travelers. Hotels that depend on a single segment for their business seldom do well throughout the year. On the other hand, hotels that derive visitors from diverse segments of travelers bank on the other segments when a particular segment registers a slack.

Avoid depending upon single businesses

If your hotel runs because of visitors that come from a single business, it would largely depend upon the performance of that business. Hotels dependent upon visitors from an airport, a business or an amusement park, can go berserk when these income generating businesses shut shop. For example, if the airport gets relocated, or the business changes headquarters or the amusement park gets tough competition from a better one, it is nonetheless important that the hotel fire keeps burning.

Check the period of the hotelâ??s in-season

A hotel which has an in-season of a minimum eight months is an option worth considering. A season shorter than this period means that the hotel can cope up with costs only if it enjoys a sufficient average rate premium during season. It is also imperative that the in-season months are consecutive

Barriers to entry

There are certain markets wherein it is easy to acquire hotel zoned land and construct a lodging facility. When the financing norms are eased, these markets see an overcrowding of hotels. In a market where there are barriers to enter into the hospitality trade for any reason whatsoever, there is less possibility of overbuilding or overcrowding. Hence, it is always preferable to make an investment in a market where they are high.

Keep the terms easy

Do not overlook the possibility of your selling the hotel eventually. Plan your acquisition keeping this fact in mind. Design the management contract and franchise agreement so it can be easily terminated. Keep flexibility intact by assigning or prepaying the mortgage, buying out partners and minimizing tax exposure.

Choose the brand of your hotel with care

Before branding your hotel, understand the implication of a brand and what segment of visitors will it attract. Established brands like business hotel or leisure lodging are safer than newer brands that are still fumbling for identity.

Conclusion

These guidelines are no key to making your hotel investment successful. But paying heed to these nuances before allowing money to change hands will definitely reap rich dividends.

It is easy to get wrapped up in the metrics of analysis, development and acquisition of income property and to forget that eventually you’ll have to engage in the human and sometimes demanding business of actually managing the property you buy.

How you fulfill that task can go a long way toward determining the financial success of your investment. Property management is a complex subject, but if you observe some basic principles you can maximize your long-term profit and minimize some of the burden.

It’s business, nothing personal

Existing tenants will naturally harbor some suspicion about a new owner. Ignore it. Eventually you won’t be the New Guy or they won’t be the tenants, so it doesn’t really matter. Conduct yourself in a businesslike manner starting on day one. Treat your lease agreements like the business contracts they really are. Don’t simply ask a new tenant to sign the lease. Explain the terms and translate the legalese. Doing so establishes the fact that the lease terms matter and you expect both sides to observe them.

The Aretha Franklin Principle

In more than 30 years of owning rental property (and watching others do the same), I have found one principle that has proved consistently valid: Don’t expect your tenants to treat your property with respect unless you treat it with respect. If something is broken, fix it. If something is dirty, clean it up. If something is dangerous, make it safe. You can be certain that very few tenants will put forward any special effort to take care of the property if your attitude is one of neglect. The converse of this principle is also true. If you behave like a slumlord, you’ll get what you deserve.

Not only does this principle occupy the ethical high ground, it also makes very good business sense. Deferred maintenance is ultimately more expensive than aggressive maintenance and it will eat away at your investment return from several sides. The postponed repair will typically ring up a larger bill later. Consider the small plumbing leak you ignore today versus the additional damage you must repair when you finally fix the leak a few months hence.

A property with deferred maintenance also diminishes the amount of rent you can expect to collect. First, because few tenants will pay top dollar to occupy a poorly maintained property. And second because those who do, but feel they are not getting what they bargained for, are more likely to default in their payments.

Finally, on what should be your big payday - the day you sell the property for a handsome profit - you’ll find yourself making price concessions because of the property’s poor condition and its below-market revenue stream. By operating on the cheap you’ve bought your way into a lose-lose-lose trifecta.

Managing for Maximum Return

Buy Right

Your goal should be to manage the property for the greatest long-term gain. You need to understand that an income-property’s value is directly related to its income stream. Hence, your best chance to maximize that gain is to grow the property’s Net Operating Income. Doing so translates into at least two benefits: It’s likely to help your year-to-year cash flow, but even more important, NOI is fundamental to the valuation of the property. Hence, by increasing the NOI you create equity.

One way to optimize the growth of the property’s NOI is to buy it right. That’s not code for “look for properties you can steal.” It is not at all uncommon to find properties that earn below-market rents. This may happen because they have the kind of deferred maintenance discussed above, but it can also occur because the owner has simply not kept pace with the current market. Some landlords, especially those for whom real estate is a sideline, find it easier to renew the leases of good tenants at a nominal increase rather than demand market rents and take on the work and risk of finding new tenants.

When you locate such a property, you must not lose sight of the fact that you should purchase only if you can do so at a price that is very close to what its current income justifies. The seller will tell you that it should rent for more and therefore it is worth more. You could rephrase the seller’s position as, “Do my job and assume my risk, but pay me as if I had done it myself.” If you purchase a property with below-market rents at a price consistent with those rents and then proceed to bring them up to market, you will almost always create additional equity.

Implement Management Improvements

Unless the property you buy is a textbook case of managerial perfection, you can almost enhance it revenue stream (and therefore its value) by making management improvements. Not to beat a fallen horse further, start by cleaning up the previous owner’s deferred maintenance. After that, begin looking for ways to make the property more appealing to your pool of potential tenants. For example…

Common Areas - For apartment and office properties, make sure the hallways and stairways are clean and well lighted. Some artwork on the walls and furniture or other decorative items in the halls creates a more welcoming and less institutional atmosphere. They convey that the owner cares about creating a quality environment.

Security - For better or worse, we’ve become a very security-conscious society. Don’t take that concern for granted, but rather deal with it in a way that distinguishes your property from other with which it competes. The appropriate level of security varies a great deal from one type property of to another, but look for ways to improve whatever you have now. Exterior lighting, higher quality doors and door locks, controlled access to parking, and monitored fire and smoke detectors are just a few of the steps you can take.

Amenities - What do tenants really want? Can you wire the building for high-speed Internet access? Provide pooled secretarial and reception services for small office tenants? Pay for a series of newspaper ads promoting the businesses in your strip shopping center? Your goal is to maximum your income stream and to do so you need to distinguish yourself and your property from your competition. The numbers will add up quickly. Do the math:

Value = Net Operating Income / Capitalization Rate

Let’s say that, in your market, the prevailing cap rate is 10% (that is, if investors are buying properties for 10 times the NOI). You purchase such a property, make some of the management improvements suggested here and increase the Net Operating Income by $1,000 per month, or $12,000 per year.

Increase in Value = 12,000 / 0.10 = $120,000

By making management improvements, you created $120,000 in additional equity. Did you spend some time accomplishing this? Yes. Did you spend some money to make those improvements? Certainly. Did you spend $120,000? Not likely, probably not even close.

People who buy single-family homes with intention of “flipping” them quickly for a profit in a hot market are relying on economic forces beyond their control to create that profit. Those who invest in equities are also relying on outside economic forces as well as the competence and integrity of company management.

The bottom line with income-producing real estate is this: If you manage your property intelligently, ethically and responsibly with an eye toward providing the kind of quality environment that can command optimal rent, you can do something that you could never accomplish with a stock or bond investment or even with a flip. You can use your own initiative and skill to create value. In the most literal of terms, you can make money.

Real estate investment is a growing, fast-paced market. New tools have made it incredibly simple to locate, evaluate, and compare many different properties from a variety of sources, side-by-side. You can search for your next home from comfort of your current living room, and in the privacy of your underpants.

Even in a healthy market, though, there will always be risks associated with property management. To maximize your ability to turn investments into profits, consider these tips:

Begin your search online. The Internet has revolutionized the real estate market. Virtually every realtor posts and updates regular home listings on their website, searchable according to your price-range, complete with pictures and a full description of amenities. Many new listings include virtual tours, which take you on a 360 degree tour of the house. You can search for those diamonds in the rough around the corner, or from thousands of miles away. You can also limit your search to those properties â??For Sale By Owner’ (FSBO), to avoid realtor fees.

Visit Realtor and estate agent businesses. For a service fee, you can gain access to a multiple listing service (MLS), which will provide you with the very same information that those agencies use. Some locations require a license for this information, even if you have the cash, so be sure to ask around.

Be prepared for some â??leg work’. You can search for, finance, and purchase houses from your computer these days, but in order to properly assess the value of a property, you must visit its location. Speak with some of the neighbors, especially those adjacent to your property. Maybe they know how well the previous occupants took care of the place, whether or not the yard turns to a swamp in the rain, and so forth. Plan a few trips, in order to visit the area in different weather, and at different times of day. This will help to avoid costly problems. Check for leaky roof structures during a rainstorm.

Once you have made an informal inspection of the premises, you may strike a contingent deal, which is dependent upon a satisfactory professional inspection. Find a reliable, experienced individual, even if it costs a bit more. Peace of mind here is worth every penny, and it couldn’t hurt to establish a connection with local professionals. You may very well find individuals whom you use frequently, time and again.

Learn as much as possible about the business, become familiar with some of the more important facets of a thorough property inspection. And review the report carefully. Record major and minor flaws, leaky plumbing or roofing, stained carpets, damage to walls or floors (note water damage), malfunctioning air conditioning or heating systems, etc. Be weary of standing water in basements and/or near foundations.

In this business, virtually everything is negotiable. There are no hard-and-fast rules to clearly indicate who is responsible for repairs, if anyone. Very fewâ??if anyâ??properties are perfect. Be realistic in your expectations, and weigh your options carefully. Do the math. If the associated costs overpower the profit you hope to turn, it would be wise to continue your search elsewhere.

Happy hunting!

Your goal in real estate investing should be to make the most profit in the least amount of time using as little of your money as possible. Buying fixer-uppers and renovating them for resale is an excellent way to increase your profits. But how do you avoid becoming a renovator and losing sight of your investment goals?

You must focus on becoming a project manager. Project management puts you in the position of making sure the renovation gets done instead of doing it yourself. Project management for fixer-uppers will include finding subcontractors, getting quotes and scheduling the work.

Know What You’re Getting Into

Your agreement with the seller should include access to the property so you can complete inspections and uncover any hidden problems. It’s best if your agreement allows you to re-negotiate the price or even nix the deal if major problems are discovered.

Be Flexible

When starting any fixer-upper renovation project, realize that the process may not go as smoothly as you expect. There will always be unplanned delays and unanticipated obstacles. Keep your schedule flexible, allow for some extra time, but work to minimize any delays that do occur.

Let the Professionals Work

It may seem like doing the work yourself will save money. This may be true if you’re working on your own home. But when you are renovating a fixer-upper for resale, everything you do must pass inspection and conform to local building codes. Are you sure enough about your skills to meet these requirements? You’re usually better off to start with a professional subcontractor rather than trying it yourself and then paying to have it done over.

Hire Qualified Contractors

When hiring the pros to do your renovation work, ask for references and check them out. Ask yourself if you can develop a good working relationship with the contractor. Don’t rely on a handshake for your business agreement. Draw up a document that spells out what’s expected from both parties.

Create a Work Schedule

To renovate your fixer-upper most efficiently, you’ll need to put together a work schedule for the subcontractors. Keep in mind that some jobs need to be done before others. Remember, subcontractors don’t always show up at the time or date you’ve scheduled. Make sure you allow for this so that one late worker doesn’t wreck the entire project.

Don’t enter into a renovation project without a budget and a set of priorities. Hire qualified subcontractors and let them do their job. Make sure the work proceeds according to schedule, but expect the unexpected. Efficient project management of your fixer-upper renovation will pay off in extra profits when you get ready to sell.

by: Bryan Dulaney

To make funds through rental property investing is mostly about the analyzing the locale, doing a survey of requirements to rent your property & by keeping your tenants happy. it is also about maintaining the property so that it can be rented year after year by reducing the vacancy period. Here are some strategies for the real estate investors to make money. * Purchase a property in a lovely area & bring a lovely engineer or an architect for renovation. * The best way to increase the value of the property is by increasing the rent by giving additional features to your property as per the desire of the tenants. For instance providing a security alarm, whiteware, garage etc. * For price advantage make your property look clean & clean. * Ensure that the basic utilities such as electricity, gas & water pipes are in working conditions. * To make funds through rental property investing make sure that you purchase property in the area where you can get high rents. * Decide whether to buy a commercial or residential property. * To make funds purchase property near a college as lots of students tend to find rental house near their college. This will lead to large number of tenants throughout the year from which you can earn huge profits. Rental property investment consists of buying a house, giving it on a rent & then making huge profits. it is important to maintain the property in order to have financial rewards throughout the period of your ownership. The main objective of any property investment is the appreciation, funds flow & tax saving. it is the best option for the investors as compared to the sudden changes in the stock market. basically, there are one categories of rental property such as single-family rental properties, commercial rental properties, multi-unit residential rental properties & holiday homes. The first category consists of long term renting of a family while the multi-unit residential rental properties includes buildings, apartments for multiple families. Holiday homes are normally for a long-term renting purpose. There are lots of ways to make funds through rental property investing. The value of the assets grow with time. So it would be wise to buy a property & wait. As the area develops with time, the price of the assets also appreciates. This helps in making funds through rental property investing. The real estate investing allows the investors in lots of ways to make as well as to save money. five of the advantages of investing in property is that the price of the asset does not fall down & always keeps on rising. The key in making funds through rental investing is by buying & holding. In rental investment, a lovely tenant can fetch you lovely wealth by paying for the insurance, mortgage, & taxes along with the monthly fees through their rental payment to you. To make funds through rental property investing you can browse through the various sites on the web. Thus, there are lots of ways of making funds by renting your property.